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Bill, Enrolled Agent
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If my mothers estate totals $350,000 in value,she

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If my mother's estate totals $350,000 in value,she establishes a beneficiary trust which holds the her IRA of $100,000 and other assets and she dies and I am the only beneficiary, how is the IRA portion of the of the inheritance or "gift" taxed to me-do I have to withdraw it or can I somehow spread the taxable amount over time?
Submitted: 6 years ago.
Category: Tax
Expert:  Bill replied 6 years ago.
Customer

If she establishes a trust, she cannot contribute the IRA to the trust. However, she can make the trust the beneficiary of the IRA. Upon her death, an inherited IRA would be established (typically registered as the trust as beneficiary of Jane Doe Deceased IRA). Distributions from the inherited IRA would have to made according to certain distribution rules based on her age at death. One of the options is to spread the distributions over the single life expectancy of the oldest beneficiary of the trust. Income taxes would be due only on the amounts that are distributed each year. However, maintaining the trust as the beneficiary requires additional trust tax reporting and is a more complicated process than designating yourself as the individual beneficiary.

If you are designated as the beneficiary of the IRA (instead of a trust) then you can spread the distributions over your single life expectancy and there would be no additional trust tax reporting and the distributions could be made directly to you. The first distribution based on your life expectancy would have to begin in the year following the year of your mother's death.

Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3078
Experience: EA, CEBS - 34 years experience providing financial advice
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